The reform of the debt‑brake, one of the most important projects for the current coalition government, has reached a decisive turning point. The reform commission remains highly divided, but a last‑ditch attempt to produce a consensus proposal is underway, according to the FAZ.
A key compromise under consideration is to tie stricter savings obligations to the debt‑to‑GDP ratio. The government would be required to accelerate spending cuts if the national debt exceeds 60 % of gross domestic product. At the same time, a rule is being discussed that would gradually remove the so‑called “area exemption” for security‑related expenditures. Currently, defence spending is only counted as one percent of GDP in the credit provision of the debt rule; this percentage could be raised incrementally.
The debate continues over whether investment spending defined in the constitution should, in the future, be easier financed with loans. A possible compromise route could also involve the Bundesbank’s recent suggestions, which are being actively discussed. Last year the bank developed a model that aims to prevent an unchecked rise in the debt ratio while enabling greater federal investment and thereby fostering higher economic growth. Under that model, if the debt ratio is above 60 %, the federal government would receive only limited additional borrowing options; if it is below 60 %, the room for borrowing would be wider.
According to FAZ sources, this compromise path represents a final chance: the fifteen‑member commission almost stalled a few days ago because of fundamental differences, and the final report is due by the end of March. The timetable is now barely feasible, as only a small core group from both sides is advancing the concept, and it still needs to be debated and approved in a larger session.
If that fails, the commission could present several mutually exclusive proposals to safeguard the long‑term sustainability of state finances, leaving the ultimate decision in the hands of the politicians.